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Former Secretary EAS Sarma cautions Petroleum Ministry over appointment of third arbitrator in RIL-Centre KG basin dispute

Wednesday, 9 July 2014 - 10:02pm IST | Place: Mumbai | Agency: dna webdesk

Former Secretary EAS Sarma has raised issues over the appointment of Michael Hudson McHugh, ex-judge of High Court Australia, as the third arbitrator for the resolution of the Krishna-Godavari (KG) basin dispute between Mukesh Ambani"s Reliance Industries (RIL) and the Centre.

Sarma has written a letter to the Petroleum Ministry on the former Australian judge's appointment as media reports had suggested that there was lack of credibility over the matter.

Pointing to media reports, Sarma said that "... Justice McHugh initially declining to accept the offer but later, changing his mind, apparently at the instance of RIL and its partners!" This raises questions over the credibility of the arbitration proceedings, he wrote. 

His objection is based on reports which said that a letter to McHugh was sent a letter on behalf on RIL and/or its partners British Petroleum/Niko to reconsider his decision on the matter. 

He added that the all parties must be made aware if correspondence with arbitrator nominee occurs with one of the parties involved. "The copy of the letter should be available  the  a single party cannot correspond wit arbitrator without informing the other part for the sake of transparency," Sarma said to dna on the phone.

He claimed that neither McHugh nor the Ministry of Petroleum and Natural Gas (MPNG) adhered to the  Indian arbitration law, the UNCITRAL and International Bar Association norms. "...I am also not sure whether the third arbitrator has made a disclosure of his association, if any, with British Petroleum/ Niko/ RIL as required under the Indian arbitration law, the UNCITRAL and International Bar Association norms", he mentioned in his letter.  "I am afraid that MPNG has failed in ensuring that the Indian arbitration law is complied with in letter and spirit...",​ he added.

He also found the manner of quoting fees by the arbitrators even before the appointment was finalized was surprising.

He urged the ministry to consult the Ministry of Law at every stage and ensure transparency in the proceeding. "The hydrocarbon reserves covered by the PSC belong to the nation. Therefore, there is a compelling public interest angle to the arbitration proceedings."

The government had penalised RIL as the output from the KG D6 basin declined following which RIL initiated arbitration claiming the decline was due to geological reasons as their contract had no provision for penalty. 

Another arbitration notice to the government in May 2014 against the delay in announcing natural gas prices.

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